Agribusiness in Africa: CEOs weigh in

BY DINFIN MULUPI | 14 JUNE 2016

The biggest opportunity for growth over the next year, according to Africa's agribusiness CEOs, is the improved penetration of markets in which they already operate. The biggest barrier to growth? Access to technology.

These are just some of the findings of PwC's Africa Agribusiness Insights Survey 2016. With respondents from 15 countries – including Nigeria, Tanzania, Kenya, Zambia, Ethiopia, South Africa, Botswana, Zimbabwe and Malawi – the publication provides insight on a range of issues, including risk management, cross-border expansion and technological innovation.

While the majority of respondents (70.6%) had not invested in African countries other than their own, 58.8% of participating company bosses see investment in other African territories as an opportunity for expansion. Zambia, Botswana, Tanzania and South Africa are the top four countries in which they are planning to invest.

The single greatest challenge to cross-border expansion, according to the CEOs, is inefficient and bureaucratic governments. Other challenges include high employee turnover (a challenge first cited this year), policy instability, cross-border regulatory requirements and corruption, crime and theft.

Revenue growth

Overall, CEOs who participated in the survey exhibited less optimism about revenue growth than they did a year ago, with the majority expecting an increase of between zero and 5% over the next 12 months. Nonetheless, the report notes that the percentage of respondents expecting high growth (20% or more) has doubled from last year. When it comes to long-term growth, half of the CEOs interviewed expect revenue increases of 6-10% over the next five years.

Besides access to technology, factors company bosses expect will most frustrate expansion include the scarcity of natural resources, labour unrest, supply-side uncertainty, the unavailability of key skills and inadequate basic infrastructure.

Technology: a challenge and an opportunity

The greatest opportunity for technological innovation, according to respondents, is the availability of real-time data, with others including systems integration, forecasting demand and managing inventory, and the ability to manage budgets despite high and fluctuating costs.

The report notes that, "The agriculture industry is reaching a level of precision that was almost unimaginable just a decade ago. With the existing technologies in place, the availability of real-time data could provide more efficient decision-making and a proactive farming approach that can be tremendously valuable."

Despite most agribusinesses struggling to finance new technology and find solutions designed to fit their specific needs, just over 88% of those surveyed expect to implement a technology-related project in the next year. The survey focusses on three key technologies: the use of drones for agricultural purposes, artificial intelligence (AI) farming and software packages.

Only 47.1% of respondents would invest (35.3%), or had already invested (11.8%) in AI farming capabilities. The report notes that this may be due to prohibitive costs, misperceptions and a limited knowledge among farmers. However, more than three-quarters of the respondents expect AI farming will make a major contribution to increasing capacity in Africa in the next decade.

To sustain growth, PwC notes that the sector needs to adapt to change and that agribusiness leaders must have strategies in place that deal with current as well as expected future trends.

Food security

Nine of the ten lowest-ranked countries on the Global Food Security Index are in sub-Saharan Africa. Each of the CEOs surveyed for the PwC report indicated they feel a responsibility towards food security and intend to make a difference by improving the availability, affordability, quality and safety of food.

Although agriculture is critical to ensuring food security and job creation, most of the senior executives interviewed expressed the view that they do not receive adequate support from government. CEOs noted this lack of support in various areas, including regulation, incentives needed for international competitiveness, adequate protection to maintain and improve local markets, developing skilled and unskilled workers and improving infrastructure.

However, 56% of CEOs indicated that they agree or strongly agree that when it comes to trade agreements and reducing trade barriers and tariffs, governments are making a sufficient effort. Just under a third of respondents had applied for government grants during the past year. Of these applications, three-quarters were successful.